An asset with 5-year MACRS life will be purchased for $12,000. It will produce net annual benefits of $2500 per year for 6 years, after which time it will have a net salvage value of zero and will be retired. The company’s marginal tax rate is 26%. What is the after-tax rate of return
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
An asset with 5-year MACRS life will be purchased for $12,000. It will produce net annual benefits of
$2500 per year for 6 years, after which time it will have a net salvage value of zero and will be retired.
The company’s marginal tax rate is 26%. What is the after-tax
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